Statute Details
- Title: Income Tax (Exemption of Foreign Income) (No. 5) Order 2010
- Act Code: ITA1947-S795-2010
- Legislation Type: Subsidiary Legislation (SL)
- Authorising Act: Income Tax Act (Chapter 134)
- Enacting Power: Powers conferred by section 13(12) of the Income Tax Act
- Order Citation: Income Tax (Exemption of Foreign Income) (No. 5) Order 2010
- SL Number: SL 795/2010
- Date Made: 17 December 2010
- Commencement: Not stated in the extract (practitioners should confirm via the legislation timeline/version)
- Key Provision: Section 2 (Exemption)
- Exempt Income: Specified dividends received in Singapore from a Malaysian company
What Is This Legislation About?
The Income Tax (Exemption of Foreign Income) (No. 5) Order 2010 is a targeted tax exemption instrument made under the Income Tax Act. In plain terms, it grants a specific company an exemption from Singapore income tax on certain dividends it received in Singapore from a foreign (Malaysia-based) company.
This Order is not a general rule that applies broadly to all taxpayers. Instead, it is an “order of exemption” that applies to a named taxpayer—Lam Soon Cannery Pte Ltd—and to specified dividends received on particular dates from a particular foreign company—Lam Soon Strategic Sdn Bhd.
The Order also ties the exemption to a shareholding threshold: Lam Soon Cannery Pte Ltd must own a qualifying percentage of the foreign company’s issued ordinary shares. Here, the Order states that the exemption relates to dividends from a company in which Lam Soon Cannery Pte Ltd owns 20.5% of the total number of issued ordinary shares.
What Are the Key Provisions?
Section 1 (Citation) provides the short title of the instrument: it may be cited as the Income Tax (Exemption of Foreign Income) (No. 5) Order 2010. While this is standard drafting, it is important for practitioners when referencing the instrument in correspondence, submissions, or internal tax governance documents.
Section 2 (Exemption) is the operative provision. Subsection (1) states that Lam Soon Cannery Pte Ltd is granted exemption from tax on the following dividends received in Singapore from Lam Soon Strategic Sdn Bhd (located in Malaysia). The exemption applies because Lam Soon Cannery Pte Ltd owns 20.5% of the total number of issued ordinary shares in the Malaysian company.
The dividends covered are narrowly defined. The Order exempts:
- Dividends received on 18 February 2004 that are “specified in paragraph 3 of the letter of approval dated 1 December 2010” addressed to the tax agent of Lam Soon Cannery Pte Ltd; and
- Dividends received on 28 December 2006.
Practically, this means the exemption is not open-ended. It is limited to (i) the foreign source (Lam Soon Strategic Sdn Bhd), (ii) the Singapore recipient (Lam Soon Cannery Pte Ltd), (iii) the qualifying shareholding relationship (20.5% ownership of issued ordinary shares), and (iv) the specific dividend events/dates. For tax practitioners, this level of specificity is crucial when advising on whether a particular dividend qualifies or whether it falls outside the scope of the exemption.
Section 2(2) (Conditions) introduces an important compliance element. The exemption under Section 2(1) is subject to the terms and conditions specified in the letter of approval referred to in Section 2(1)(a). In other words, the Order itself does not list all conditions; it incorporates them by reference to a separate approval letter dated 1 December 2010.
From a legal and procedural standpoint, this is a key point. Practitioners should treat the approval letter as part of the effective legal framework governing the exemption. Failure to satisfy conditions in the approval letter could jeopardise the exemption even if the dividend otherwise appears to fall within the dates and shareholding parameters stated in the Order.
Finally, the Order includes a “Made this 17th day of December 2010” signature by PETER ONG, Permanent Secretary, Ministry of Finance, Singapore. This indicates the instrument is formally enacted by the competent authority under the Income Tax Act’s delegation of power.
How Is This Legislation Structured?
The instrument is structured in a conventional subsidiary legislation format with a short title and an operative exemption clause:
- Section 1 (Citation): identifies the name of the Order.
- Section 2 (Exemption): sets out the scope of the tax exemption, including the named taxpayer, the foreign payer, the qualifying shareholding percentage, the specific dividend dates/events, and the condition that the exemption is subject to terms in a referenced approval letter.
Notably, the extract indicates only these two sections. There are no “Parts” or additional schedules in the provided text. This is consistent with a targeted exemption order: it is designed to be short, precise, and event-specific.
Who Does This Legislation Apply To?
The Order applies to Lam Soon Cannery Pte Ltd as the Singapore recipient of dividends. It does not purport to apply to other taxpayers. Even if another company receives dividends from a Malaysian company, the exemption would not automatically extend to them unless a similar exemption order (or a different statutory mechanism) applies.
In addition, the Order is limited to dividends received in Singapore from Lam Soon Strategic Sdn Bhd and is conditioned on the ownership relationship: Lam Soon Cannery Pte Ltd must own 20.5% of the total number of issued ordinary shares in the Malaysian company. The exemption is therefore tied to both the identity of the payer and the specific shareholding percentage.
Because the exemption is also tied to dividends received on 18 February 2004 (as specified in the approval letter) and 28 December 2006, the practical scope is further narrowed to those dividend events. Practitioners should therefore assess qualification at the level of each dividend distribution and the underlying documentation.
Why Is This Legislation Important?
This Order is important because it illustrates how Singapore’s Income Tax Act can be implemented through specific exemption orders for foreign-sourced income. For corporate taxpayers and their advisers, such orders can materially affect tax outcomes—particularly where dividends are received from foreign subsidiaries or associated companies.
From a compliance and advisory perspective, the Order highlights three practical considerations:
- Specificity of scope: the exemption is limited to named parties and specified dividend dates/events. Taxpayers should not assume that dividends of the same general type automatically qualify.
- Shareholding threshold: the exemption is linked to a qualifying ownership percentage (here, 20.5% of issued ordinary shares). Where ownership changes, practitioners should verify whether the exemption still applies to the relevant dividend period.
- Incorporation of approval-letter conditions: Section 2(2) makes the exemption conditional on terms in a separate approval letter. This creates an additional document to review, and it may require ongoing compliance actions or record-keeping.
For enforcement and dispute risk, the incorporation-by-reference approach means that the approval letter’s conditions may be determinative. If a tax authority later questions whether conditions were met (for example, regarding documentation, corporate structure, or other conditions), the taxpayer’s position will likely depend on the content and satisfaction of those terms.
In practice, this Order would typically be relevant to tax teams managing dividend receipts, foreign investment structures, and tax reporting positions. It may also be relevant during tax audits, where the taxpayer must substantiate the exemption claim by producing the approval letter, dividend vouchers, and evidence of the shareholding relationship at the relevant times.
Related Legislation
- Income Tax Act (Chapter 134) — in particular section 13(12) (the enabling provision for making exemption orders)
- Income Tax Act timeline / legislation versions — to confirm the applicable version of the Income Tax Act and any amendments relevant to the exemption framework
Source Documents
This article provides an overview of the Income Tax (Exemption of Foreign Income) (No. 5) Order 2010 for legal research and educational purposes. It does not constitute legal advice. Readers should consult the official text for authoritative provisions.